Lagarde, who was in London on Friday to present the fund’s annual health check on the UK economy, said it was possible the economy would shrink in two consecutive quarters, which is the definition of a recession.
“We have looked at all the scenarios. We have done our homework and we haven’t found anything positive to say about a Brexit vote,” she said.
The IMF said a panic among investors would trigger shockwaves throughout the economy following a vote to leave, sending shares and property prices into downward spiral.
In a report that is clearly helpful to campaigners for Britain to remain in the EU, the it said that even over the longer term growth would be depressed.
Vote Leave reacted angrily to the findings, which it said were part of a plan by the government “to circumvent purdah rules by using the IMF, which is funded by the EU and the UK government”.
The Brexit campaign accused the Washington-based organisation of being “consistently wrong about its forecasts for the UK economy” and said it was wrong again on Britain leaving the EU. It also attacked Lagarde’s reputation saying it was sullied by criminal allegations of negligence over €400m (£314m) of payments in the Bernard Tapie affair, dating back to when she was French finance minister.
Tory MP Priti Patel said: “The IMF warned Britain it was playing with fire when it set out a plan to deal with the deficit. Now our economy is stronger than nearly every other major economy. Today, the IMF is talking down Britain because we want to take back control from Brussels. They were wrong then and they are wrong now.
“The EU-funded IMF should not interfere in our democratic debate weeks before polling day. It appears the chancellor is cashing in favours to Ms Lagarde in order to encourage the IMF to bully the British people – it is a sign of the desperation in the in campaign.”